* Tax cutters argue high taxes drive people out of state
* Studies find little support for idea of tax migration
By Nanette Byrnes
Feb 1 Millionaire golfer Phil Mickelson's recent
musings on leaving California to avoid its high taxes seemed to
support the idea, popular in some state capitals nowadays, that
Americans will flee high-tax states for low-tax ones.
The threat of 'tax migration' is part of debates swirling in
some states that are considering big changes to their tax codes.
But studies show that interstate tax refugees, or potential ones
such as Mickelson, are few and far between.
"It is very difficult to see a migration response when you
look at the people affected by the taxes," said Cristobal Young,
an assistant professor of sociology at Stanford University, who
has studied tax increases in California and New Jersey.
Not even the super-rich exit in large numbers after taxes go
up in their states, according to a growing body of research that
shows relocation decisions involve many factors beyond taxes.
Some politicians are not so sure though. Tax-cut advocates
in Kansas, Nebraska, Missouri, Oklahoma and Louisiana have
voiced concern that their states are not competitive with nearby
no-tax states, such as Texas and Florida, and that the imbalance
chases away citizens and jobs.
A test is coming in Kansas City, which straddles two states:
Kansas, which cut its top income tax rate to 4.9 percent from
6.45 percent on Jan. 1, and Missouri, where the top rate remains
"It remains to be seen what will happen with Kansas, but
people are watching," said Missouri state Senator Eric Schmitt,
a Republican, who has sponsored one of several tax cut proposals
now pending in that state house.
"People are rational economic actors and they are going to
make decisions that are best for themselves."
TAXES AND MOVING VANS
Besides recent tax increases in California, Maryland also
increased income taxes on high earners last year and the
governors of Massachusetts and Minnesota have suggested
increasing income taxes in part to finance sales tax cuts.
One of the strongest proponents of tax migration is Arthur
Laffer, father of 'trickle down' economics and an adviser to tax
cut proponents in North Carolina, Kansas and other states.
Between 2001 and 2010, according to Laffer's research, the
nine states with the lowest tax burdens had faster population
growth than the nine states with the highest tax burdens.
His studies of U.S. Internal Revenue Service tax returns and
United Van Lines moving truck data showed more people moving to
low-tax states from high-tax states than vice-versa.
Critics argue that many other factors, including strong
economies, drive population growth. In two separate studies -
one of a 2004 tax increase for New Jersey residents earning more
than $500,000 per year, and one of a 2005 California tax
increase on those with income greater than $1 million -
Stanford's Cristobal Young and Charles Varner of Princeton
University found neither measure substantially impacted the
supply of millionaires in those states.
In California, the pair found the highest-income
Californians were actually less likely to leave after the
millionaire tax was enacted than they had been before. One
reason could have been that most Californians earning more than
$1 million did so for only a few peak years, the authors said.
So the added bite of the tax increase was brief.
Separate studies of tax migration in Canada, Switzerland and
areas surrounding large U.S. cities have also found taxes played
little part in location choices, which involved factors such as
commute times, community attachments and real estate costs.
Migration to warm-weather states including Texas and Florida
goes back at least 50 years, noted University of Connecticut tax
law expert Richard Pomp. Back then, some of the states people
were leaving, including his own, had no income tax either.
On the whole, taxes do not have a material impact on where
people choose to live, said Mark Zandi, chief economist for
"People live in California for lots of different reasons,"
he said. "It's very difficult for them to find somewhere to go
that's comparable to that state."